# Exercise on net present values-level Y1 EconWatch

Thread starter 1 week ago
#1
Hi folks,
I'd be very grateful if someone could help me on this one:
An investor is given an opportunity to invest in one of two projetcs:

a) costs 10 000 now and pays back 15 000 after 4 years
b) costs 15 000 now and pays back 25 000 after 5years
current rate of interest= 9%

by calculating the net present values, decide which if either of these projects is to be recommended.

I used the following formula: a(1-r^n)/(1-r)....
0
1 week ago
#2
a) NPV = 626.38
Net cost = 10000
Net benefit = 15000 / (1.09^4)

b) NPV = 1248.28
Net cost = 15000
Net benefit = 25000 / (1.09^5)

So better to choose the second one
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